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Sticking Points in Transatlantic Digital Trade, Part II

· November 16, 2018

This is the second post in a series on tensions in the Transatlantic digital trade relationship, and how to resolve them.  Our previous post focused on the proposed EU “Digital Services Tax.”

Despite the vast amount of Transatlantic digital trade that occurs between the United States and Europe, the two economic powers’ current trade relationship is complicated by various specific EU policy proposals affecting the digital sphere.  As the U.S. and EU explore a trade agreement, these items threaten to muddy the waters.

In addition to the controversial Digital Services Tax, a proposed regulation on so-called “terrorism content,” as well as a proposal for new “platform-to-business” regulations, EU policymakers have also pursued a contentious series of new copyright regulations aimed at U.S. Internet exporters that threaten to upset the existing Transatlantic digital consensus.

As DisCo has covered, Brussels policymakers have sought to impose new compliance obligations on U.S. Internet companies popular with European users for several years.  Earlier this summer, the EU Parliament voted on a proposal to adopt a new Copyright Directive containing controversial new regulations on links to news content, and Internet filtering, among other issues.  

The regulations on linking to news content have been described by the U.S. government as a “link tax” and a “key barrier to digital trade.”  Designed with the goal of compelling U.S. social media, aggregators, and similar services to underwrite the European news publishers to whom they point, the link tax may result in the EU breaking from long-established international trade commitments.  There’s no question, however, that link tax seeks to insulate European publishers from the disruptive impact of the U.S. technology sector.  Indeed, in a recent proceeding before the U.S. Trade Representative, a news publisher representative even acknowledged the proposal aimed to provide a “higher level of protection for news publishers in the European Union,” despite insisting that the new regulations “were not trade barriers.”

Separate rules in the proposed Copyright Directive would also regulate the indexing of images online, creating another source of complications.  Curiously, EU regulators champion these new linking regulations despite the fact that multiple studies [1], [2] found they disadvantaged even EU publishers when implemented in Spain.

The link tax and image indexing restrictions are not the only provisions of the EU’s proposed Copyright Directive that will disrupt the transatlantic consensus.  Another section, referred to as the “upload filter” requirement, would compel online services available in Europe to either secure a license for everything their users post, proactively monitor users’ posts in real time, or risk direct liability — all of which upends intermediary protections in Europe’s 17-year old e-Commerce Directive.  When the EU Parliament approved the text in September, its press release specifically identified U.S. firms as targets.

In addition to targeting U.S. businesses for the benefit of EU publishers, the proposed approach departs starkly from the shared responsibility model of “notice and takedown” that has characterized transatlantic digital trade since the turn of the millennium, and which appears in numerous free trade agreements, including the recently concluded U.S.-Canada-Mexico agreement (USMCA, sometimes called NAFTA 2.0).  

Like the proposed Digital Services Tax, the proposed Copyright Directive presents an obstacle that trade negotiators will need to address if the U.S.-EU trade relationship is to remain constructive.

European Union

DisCo is dedicated to examining technology and policy at a global scale.  Developments in the European Union play a considerable role in shaping both European and global technology markets.  EU regulations related to copyright, competition, privacy, innovation, and trade all affect the international development of technology and tech markets.